Author Topic: TAX Efficient options for cash  (Read 1188 times)

jonb

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TAX Efficient options for cash
« on: January 13, 2020, 02:48:12 pm »
Hi All

Been a while since I have been on here! hope all the OG's are alive and kicking  :TU:

I sold a property earlier last year (perfect timing!) and been sitting with the money in cash / My tax guy just told me though that the interest earned will be taxed 45% along with my standard monthly earnings!

So, in essence, that means if a money market fund was belting it and giving you 8% you only just actually getting over 4%

Hoping for some thoughts on these options


1. Buy another property and live in it (don't own property and am currently renting, not sure if I will always live in SA hence wanting liquid but can always let out)

2. I have already used my 209 and 2020 offshore limit, so get a tax clearance and move this cash offshore and slowly feed into a portfolio based in USD ( this portfolio is around 5 years old and pretty well-diversified)

3. Put in in a Satrix world ETF for easy management (easiest option)

4. Keep in cash! (after tax its like 4% max  :-[


I appreciate any thoughts on this!

Honey Badger

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Re: TAX Efficient options for cash
« Reply #1 on: January 27, 2020, 02:34:01 pm »
My vote is Satrix World ETF simple, easy, diversified globally.

Patrick

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Re: TAX Efficient options for cash
« Reply #2 on: January 28, 2020, 02:23:29 pm »
I'm allergic to cash, I'd invest it asap.

Jaco

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Re: TAX Efficient options for cash
« Reply #3 on: February 04, 2020, 11:41:33 am »
I'm considering to "swap" my current property for a smaller one and invest the difference from the sale/purchase. Therefor I've also been thinking about this conundrum.

My one idea is to make a fixed deposit, at the bank, that will end at the end of the tax year. According to SARS the first R23800 from interest is exempt from tax and therefor my deposit shouldn't exceed an amount that would earn more. The rest, if any, will have to go to ETF's or shares. At the end of the year the interest will be paid at the start of the new tax year into my tax free investment and I'll repeat the process with a new fixed deposit.

Thoughts will be appreciated.

XXXXX

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Re: TAX Efficient options for cash
« Reply #4 on: February 08, 2020, 07:13:35 am »
Interesting thoughts.   And touching across multiple dimensions - correct answer will depend on your risk profile and personal circumstances.  Generally, I can't really criticize your approach (with out knowing your personal circumstances)

Things to consider
I'd suggest ensuring that you max out your annual tax free investment allowance (but consider future access to capital)
Investments in the fixed deposits may offer attractive interest rates, but essentially they are priced on the yield curve and your capital is locked for the duration.   (more a comment, than a criticism).  Money market may be a alternative solution.
Bear in mind that ETF's (depending on the underlying fund) may also pay interest income.   Consider carefully in conjunction with your investment risk profile.  The risk profile of the funds, is also needs to be considered carefully
Investments in shares/ETF's, may trigger a 20% dividend withholding tax (but are exempt in your hands) - this may need to be considered in your individual tax circumstances (i.e. if you're retired and have minimal income - it actually may actually benefit you to invest all your income in interest bearing investments).